Giant cargo ships were Baltimore port’s financial salvation and its curse

Revitalizing the trade gateway amid the competitive pressures of the 2000s took years. Specialized maritime vessels carved deeper channels in the harbor, workers buttressed aging wharves and towering new cranes took their place along the water.

The ambitious makeover enabled the port last year to process a record amount of cargo. But it also tied the city’s fortunes to giant oceangoing vessels that some experts warned were prone to accidents, difficult to maneuver in tight quarters like those in Baltimore and likely to make global supply chains less resilient.

“We’re at the point where a lot of the costs of these mega ships have become bigger than the benefits,” said Olaf Merk, who authored a 2015 study for the Organization of Economic Cooperation and Development that was critical of the vessels.

One of those ships was the Dali, which collided with the Francis Scott Key Bridge on March 26, leading to its collapse and the deaths of six people. The Dali was not the largest ship Baltimore had ever seen. But it was plenty big: almost 1,000 feet long and nearly 160 feet wide. It weighed in at more than 116,000 tons.

In the weeks surrounding the crash, three other jumbo vessels were involved in potentially serious incidents.

Earlier this month, the container ship APL Qingdao lost power as it transited New York Harbor and had to be rescued by three towing vessels. On March 18, a Chinese container ship slammed into a dock at the port of Kocaeli in Turkey, toppling three cranes. And in February, five people died south of Guangzhou, China, when a container ship collided with the support pillars for the bridge, sending part of it into the water.

Globally, over the decade through 2022, there were more than 200 incidents of container ships damaging port infrastructure, including harbor walls, piers and quays, according to Allianz Commercial, a global insurer.

Modern container ships are a miracle of efficiency, designed during the era of “hyper-globalization,” when merchandise trade flows grew year by year. Today’s largest vessels — too large to call at Baltimore — can haul more than 24,000 20-foot equivalent units (TEUs), a standard cargo measurement, roughly 16 times the capacity of their late 1960s counterparts. Some modern ships stretch for more than 1,000 feet, the length of three football fields.

But for several years, Allianz, which insures many of these behemoths, has warned that putting so much cargo on a single ship guaranteed a massive bill if something went wrong. The largest ships, able to carry more than twice as many containers as the Dali, pose especially costly dangers, according to the insurer.

“Yes, we keep bringing the per unit cost of transportation down using these larger vessels. And it all makes sense. But what has happened as an unintended consequence of this increase in size is that the risks associated with these vessels also significantly increased,” said Rahul Khanna, global head of marine risk consulting for the German insurance company.

In response to questions, the Maryland Port Administration said it engaged in regular communication with terminal operators, harbor pilots, tug boat operators and other supply chain executives who participate in “modeling exercises to simulate the arrival and departure of large-scale vessels.”

The struggle to save the port began before the Panama Canal in 2006 announced expansion plans that would for the first time allow the world’s largest container ships to reach ports on the East Coast. These new “post-Panamax” ships, sailing from Asia with more than 10,000 steel containers, promised shippers impressive cost savings.

But there was a catch: The ships’ massive size required ports to upgrade their facilities — often at some taxpayer expense — before they could welcome them. And for Baltimore and its rivals, there was no time to waste.

In meetings with port representatives, the giant ocean carriers made it clear they would not stop at each, or even most, East Coast ports. Only a lucky few cities between Halifax, Nova Scotia, and Miami would be favored with regular service.

“What carriers do best is play ports against each other,” said John Porcari, who was Maryland’s transportation secretary at the time.

Baltimore had no choice but to accept the larger ships as part of a strategy to prosper by catering to all sorts of cargo, including containers, bulk freight, paper, autos and agricultural equipment, Porcari said. Whatever “Luddite” alarms were sounded by industry critics did not stop carriers from deploying ever larger ships. Abstaining from serving the giant vessels would have meant seeing the port’s overall business wither.

“For individual ports, it was compete or die,” he said.

Among those promoting port expansion was then-Vice President Joe Biden, who in 2013 visited East Coast facilities, urging them to help spark a U.S. manufacturing rebound.

“All of the East Coast ports, all of them, need to get in the game,” Biden said in Baltimore, celebrating a $10 million federal grant for cargo handling and rail access.

Baltimore’s mayor at the time, Stephanie Rawlings-Blake, was among three mayors who joined Biden later that year on a trip to Panama to see the expanded canal.

“The future of shipping wasn’t a secret,” said Rawlings-Blake, who served as mayor from 2010 to 2016. “The size of the ships relate directly to the amount of jobs that are available in and around the port,” she said, and everyone in the region knew that being among the first “gave us an economic advantage.”

A few decades earlier, Baltimore had been the second-largest container port on the East Coast, trailing only the twin ports of New York and New Jersey. But by 2007, Baltimore had fallen to eighth place.

The ocean freight business also was changing in ways that put new pressures on ports. Carriers were forming powerful alliances that demanded volume discounts on port fees. As they introduced larger ships, industry giants like Maersk rearranged their operations, serving fewer ports overall while unloading more cargo at the handful they visited.

That realignment helped keep the carriers’ costs down, but it made global supply chains more brittle, according to Merk, the author of the 2015 OECD megaship report. With so much cargo pouring into a given port, any accident or interruption of service could have far-reaching consequences. The monster vessels, and their thinner port networks, could lead to “more limited supply chain resilience,” the report concluded.

For ports, the change meant a new winner-take-all reality.

Baltimore’s competitors — New York; Norfolk and Savannah, Ga. — were improving their ports by dredging deeper channels and introducing new information technology systems, according to “Vision 2025,” a port administration document published in the spring of 2007.

In waters south of Manhattan, teams blasted through solid rock to deepen 35 miles of navigation channels for the new ships. Dredging in Savannah was forced to work around a lost Confederate ironclad warship, resting near the mouth of the city’s river.

The competitive challenge to Baltimore’s port emerged when the city’s blue-collar workers were facing dwindling opportunities. The Bethlehem Steel mill that was sold in 2003 to Wilbur Ross’s International Steel Group was once the largest foundry in the world, employing 30,000 workers. By 2006, it was dying a slow death. The GM plant that closed in 2005 boasted peak employment of around 7,000.

The manufacturing downturn was part of a decades-long national trend that hit the Baltimore area especially hard. The region lost roughly one 1 of every 4 factory jobs between 2000 and 2006, well above the 18 percent national decline, according to the Bureau of Labor Statistics.

The first post-Panamax ships appeared in the late 1990s, before the canal was widened. Ocean carriers initially used them on the longest routes from Asia to Europe. A relative handful made their way to Baltimore via the Suez Canal. But it was clear they would eventually reach the East Coast in greater numbers.

“Most ports embraced the idea of going bigger. It was really a race to see who would develop first,” said Sal Mercogliano, a maritime historian at Campbell University in Buies Creek, N.C.

A 2008 U.S. Army Corps of Engineers assessment concluded that most East Coast ports would not be able to handle the post-Panamax vessels. “Larger ships require the terminal to have longer docks, more storage area, deeper water at the dock and a capacity to move containers from the terminal to truck or rail,” the corps concluded.

It said that Norfolk; Charleston, S.C.; and Savannah, which served as regional distribution centers for goods coming from Asia, were best positioned.

As the port of Baltimore raced to keep pace, Maryland officials prepared for significant new spending. From 2007 to 2012, the state planned $593 million in port improvements, according to Maryland’s consolidated transportation program. Hundreds of millions of additional taxpayer dollars funded better rail connections, paved roads near the harbor and addressed highway bottlenecks.

“If you wanted to be a major port, you had to gear up to handle vessels of 15,000 containers,” said Lars Jensen, chief executive of Vespucci Maritime in Copenhagen. “If you didn’t, you would be cut out. You had no choice. Carriers have the leverage.”

State officials prepared an across-the-board menu of improvements, including identifying new sites to dump material dredged from the seabed, and construction of a 17-acre container storage facility.

Funds also were set aside to rehabilitate facilities and deepen the waters at Dundalk Marine Terminal, which handled auto imports and other roll-on, roll-off cargo. The berths there dated to the 1930s when the Harbor Municipal Airport stood on the site. At low tide, some cargo vessels had grounded on the harbor bottom as they approached the docks.

Still, Baltimore did enjoy one advantage. Unlike some rivals, it had long boasted a 50-foot deep main channel, which connected the port to the Chesapeake Bay and the ocean beyond, giving it the required depth for the big vessels.

But the berths where cargo ships parked while being unloaded at Seagirt Marine Terminal, the port’s principal container facility, were only 45 feet deep. That difference was enough to prevent fully loaded vessels from docking.

“We were all very keenly aware of the fact that we needed to upgrade Seagirt, that we needed the larger cranes and the larger berths to accommodate larger ships. So we went to great lengths to be able to do that and keep our port competitive,” Martin O’Malley, who was Baltimore’s mayor from 1999 to 2007, then Maryland’s governor until 2015, said in an interview.

In late 2009, with state coffers suffering from the Great Recession, O’Malley announced a $1.3 billion public-private partnership to build a 50-foot-deep berth and equip it with four massive cranes at private expense. Ports America, Seagirt’s operator, agreed to spend a total of $500 million over the agreement’s half-century life, saving the cash-strapped state from a hefty tab.

“Jobs, jobs, jobs. This deal is all about job creation in Maryland and job creation now,” O’Malley said when it was announced.

Seagirt’s first 50-foot-deep berth, equipped with post-Panamax cranes, became operational in 2013, making Baltimore one of only two East Coast ports equipped for the big ships. (Today, there are four.) Eight years later, a second deepwater berth was completed. O’Malley’s successor, Republican Larry Hogan, crowed that it would allow the port to service two supersized ships at the same time and “lift our capacity and our potential to another level.”

The port administration credits the partnership with more than doubling the port’s container business. The job results, however, have been mixed. Since the expanded Panama Canal opened in June 2016, manufacturing employment in the Baltimore-Columbia-Towson area grew by 6 percent, faster than the national average.

But employment in the larger trade and transportation sector dipped slightly even as the national figure rose by 6 percent, according to the Bureau of Labor Statistics. The region has gained about 3,400 manufacturing jobs while losing almost the same number of trade and transportation jobs.

Today, long after the initial projects were completed, additional improvements are needed. While two Seagirt berths can accommodate the giant ships, only the eastern half of the terminal’s access channel is 50-feet deep. The western half of the horseshoe-shaped waterway is eight feet too shallow.

That means vessels needing more than 42 feet of water must back away from the Seagirt docks, a time-consuming maneuver that can involve stopping the main engine to switch from reverse to forward gear. When that is done, a ship might lose its main engine power and drift into the dock or another vessel anchored nearby. There is no indication this is what happened with the Dali, which struck the Key Bridge almost one hour after setting sail.

“These larger vessels have a greater risk of grounding, collision, allision, and marine casualties, which has resulted in limitations to operations within the harbor,” concluded a February 2023 U.S. Army Corps of Engineers feasibility study of a proposed $93 million project to widen and deepen the western access channel.

(“Allision” refers to a moving ship that runs into a second, stationary vessel.)

In June, Lt. Gen. Scott Spellmon, head of the Army Corps of Engineers, recommended to Congress that the Seagirt channel be dredged to a depth of 50 feet. The project would allow Seagirt to move the larger vessels in and out more quickly, the corps said, eliminating the need to back away from the dock.

The MPA said it expects the project to begin this summer and take two years to complete.

Now, the port faces fresh challenges, as work continues to remove the Key Bridge and ship debris blocking Baltimore’s main shipping channel.

Army engineers aim to open a 35-foot-deep shipping channel by the end of this month, which would allow limited shipping to resume, according to Spellmon. And if all goes well, the original 50-foot-deep waterway will be open by the end of May.